Raise taxes to boost fuel efficiency: auto executives

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Detroit: There’s a simple way to get Americans to drive fuel-efficient cars, according to auto executives, but they are not going to like it—sharply hike the gas tax.

While politically unpalatable, gasoline that costs at least $4 a gallon would have a far greater effect on American fuel usage than Washington’s $25 billion loan programme meant to spark investment in new technologies, executives t said at Auto Summit in Detroit.

Consumer demand for fuel-efficient cars like Toyota Motor Corp’s Prius and Ford Motor Co’s Escape hybrid surged last summer as gasoline prices soared above $4 a gallon.

But with the pressure off—the average US retail gas price was $2.66 a gallon at the end of October, according to the benchmark Lundberg survey —Americans are once again buying fuel-hungry sport utility vehicles and other large cars.

“The US allows the price of gasoline to go back and forth across this line where the consumers don’t care about fuel efficiency and where consumers do care about fuel efficiency,”Mike Jackson, chief executive of AutoNation Inc, the number one US auto retailer, told the summit in Detroit on Wednesday.

Gradually raising gas taxes to the point where fuel costs $4 to $5 at the pump will do more to stimulate demand in next-generation vehicles like General Motors Co’s forthcoming Chevy Volt plug-in hybrid than any other policy initiatives, including raising the national fuel efficiency standards know as CAFE, Jackson said.

Jerry York, a former GM board member and an adviser to billionaire investor Kirk Kerkorian, agreed. “Unless gas is $3.50 or $4 a gallon, consumers are not going to want to buy those cars,”York said on Monday.